Question

If a business sells for $8.000 equipment that cost $25,000 and has $20,000 of accumulated depreciation, how is this reported in the statement of cash flows? Multiple Choice $8,000 inflow as an investing activity, and $3,000 gain as a subtraction from net income under operating activities $8,000 cash inflow in financing activities, and $3,000 loss as an addition to net income under operating activities $8,000 cash inflow as an investing activity only 58.000 cash inflow in financing activities, $3,000 gain as an addition from net income under operating activities

Answer 1

When a long term asset is sold, on the cash flow statements, the sale proceeds from the sale of such long term assets is shown under Investing Activities as an inflow and the gain on the sale of such asset is showed under the operating activities as a deduction from Net Income.

So, Here an Equipment is sold for $8,000 which are the proceeds and need to be shown under the Investing activities as an inflow. The Gain from the sale is $ 3,000 ( $25,000 - $20,000 -$8,000) to be shown under the Operating Activities as a deduction from Net Income.

Hence Option $8,000 inflow as an Investing Activity, and $3,000 gain as a subtraction from Net income under Operating Activities is correct

So, the other options are incorrect.